Entity restructurings are the net tax effect of transactions undertaken to streamline business operations, including the termination of a related party distributor and worthless stock deductions for our photonics subsidiaries, which fully ceased operating during the fiscal year ended March 28, 2025. The March 29, 2024 entity restructuring relates to post-acquisition integrations to align business operations and integrate Crocus’s assets and workforce into the Company’s existing affiliates. The Company engaged in an intra-entity asset sale that resulted in a taxable gain reduced by net operating losses (“NOL”) in France and the generation and utilization of foreign tax credits in the U.S. Assets were transferred at fair market value pursuant to a valuation. The entity restructuring increased the effective tax rate primarily because a deferred tax liability was established on the difference between the fair market value and book value of Crocus’s intellectual property transferred to the U.S.

The Tax Cuts and Jobs Act of 2017 (“TCJA”) required the capitalization and amortization of domestic and foreign research and development (“R&D”) expenditures over five and 15 years, respectively. On July 4, 2025, the OBBB was enacted and restored immediate expensing for domestic R&D and provided a one-time Accelerated R&D Amortization Election to deduct previously capitalized domestic R&D over two years. In addition, Section 59(e) of the Internal Revenue Code of 1986, as amended (the “IRC”), allows an annual election to capitalize and amortized domestic R&D expenditures over ten-years. The capitalized research and development costs deferred tax asset above represents the tax effect of the remaining cost to be amortized.

The Company acquired NOL and research and development tax credit (“R&D Credit”) carryforwards that are subject to limitations and valuation allowances. The IRC provides for a limitation of the annual use of NOLs, R&D Credits, and other tax attributes following certain ownership changes that limit the ability to utilize NOL and R&D Credit carryforwards. Under IRC Sections 382 and 383, an ownership change is generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period.

NOLs and capital losses may be available to reduce future taxable income. As of March 27, 2026, the Company had net Federal NOLs of $2,857 that were generated after December 31, 2017, and therefore carryforward indefinitely. State NOL carryforwards have been fully utilized. As of March 27, 2026, the Company had deferred tax assets (“DTAs”) related to capital losses, equity method of accounting, and state R&D Credit carryforwards of $1,457, $1,352, and $3,290, respectively. The Company has established valuation allowances of $5,779 to fully offset the capital losses and equity method of accounts DTAs and most of the state R&D Credit.

As of March 27, 2026, the Company had net income taxes refunded for the year was $27,081, which consisted of a $30,889 federal refund offset by $3,324 in net foreign payments (including $2,217 paid to the Philippines) and $484 in net state payments.

The Company’s intent is to permanently reinvest and use its existing foreign cash to fund its subsidiaries’ working capital needs, short-term and long-term capital projects, and to make investments and acquisitions.

The Company filed carryback claims allowable under the Coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) to utilize NOLs and carryover credits generated during fiscal year 2021. As of March 27, 2026, the Company has $11,468 tax receivables, primarily related to the CARES Act, of which $7,375 is classified as current.

Uncertain Tax Positions

As of March 27, 2026, March 28, 2025 and March 29, 2024, the Company had gross uncertain tax positions which would impact the effective tax rate, if recognized. These amounts are recorded as a long-term liability, as the Company does not anticipate payment within one year.

The Company believes that all tax positions are adequately provided for; amounts asserted by tax authorities could be greater or less than the accrued position. Accordingly, the Company’s provisions for federal, state and foreign tax related matters to be recorded in the future might change as revised estimates are made, or the underlying matters are settled or otherwise resolved.

The Company’s policy is to classify interest expense and penalties, if any, as components of the income tax (benefit) provision in the consolidated statements of operations. The Company recorded net increases of $305, $323 and $826 in interest, penalties and releases during fiscal years 2026, 2025 and 2024, respectively. As of March 27, 2026 and March 28, 2025, the amount of accrued interest and penalties totaled approximately $1,534 and $1,230, respectively.

Examinations by Tax Authorities

The Company and its subsidiaries are routinely subject to examination by taxing authorities in the United States and the foreign jurisdictions in which it does business. Currently, the Internal Revenue Service is auditing the CARES Act carryback claim for fiscal years 2016 through 2021, and the Bureau of Internal Revenue is auditing our Philippine subsidiary for tax year 2019. U.S. and material foreign jurisdictions statutes of limitation remain open as of 2016.